CalAmp Reports Fiscal 2019 Third Quarter Financial Results

Transcription

1 NEWS RELEASE CalAmp Reports Fiscal 2019 Third Quarter Financial Results 12/20/2018 Q3 Software and Subscription Services revenue of $19.9 million, up 25% year-over-year Q3 operating cash ow of $11.3 million IRVINE, Calif., Dec. 20, 2018 /PRNewswire/ -- CalAmp (Nasdaq: CAMP), a technology solutions pioneer leading transformation in a global connected economy, today reported its nancial results for its scal 2019 third quarter ended November 30, "Our Software and Subscription Services (SaaS) business continued to perform well as our SaaS revenue increased 25% year-over-year. We continue to focus on accelerating our e orts towards a more comprehensive recurring revenue model," said Michael Burdiek, President and Chief Executive O cer. "Although we were disappointed in the short-term execution around our supply chain diversi cation e orts as previously announced, we are taking steps to address our operational challenges. As we look to the future, we believe we can capitalize on our SaaS pipeline and achieve our long-term growth targets." Q Financial & Business Highlights Consolidated revenue of $88.5 million, down 6% year-over-year, due to supply chain execution challenges. Gross margin was 41.1%, up from 40.8% in the prior year. Telematics Systems revenue for the third quarter was $68.6 million, down 12% year-over-year, principally due to a decline in legacy LoJack SVR product sales. Software & Subscription Services revenue for the third quarter was $19.9 million or 23% of consolidated revenue. Revenue growth was driven by freight transport subscriber additions and LoJack subscription services. 1

2 GAAP net loss of $0.5 million or a loss of $0.02 per share due to a $1.2 million restructuring charge for vacant o ces, severance and employee related costs. Adjusted basis net income of $8.9 million or $0.25 per diluted share. Operating cash ow of $11.3 million, with Adjusted EBITDA of $11.4 million and Adjusted EBITDA margin of 13%. We entered into a multi-million dollar SaaS contract with a public cloud service provider for a high value asset tracking solution. We entered into a global supply agreement with Telefónica, to provide intelligent telematics devices for eet and asset management applications in Mexico with anticipated expansion across other Latin American and European markets. We announced a partnership with Overhaul Group, Inc., a supply chain integrity solutions company, to enable global transportation service providers with actionable intelligence and predictive analytics to improve supply chain e ciency. Our Board of Directors authorized a new one year share repurchase program under which we may repurchase up to $20 million of outstanding common stock. Summary Financial Information: (In thousands except per share amounts) Three Months Ended November 30, Description Revenues: $ 68,552 $ 77,775 Telematics Systems Software & Subscription Services 19,943 15,894 $ 88,495 $ 93,669 Gross pro t $ 36,381 $ 38,187 Gross margin 41 % 41 % Net income (loss) $ (522) $ 11,806 2

3 Net income (loss) per diluted share $ (0.02) $ 0.33 Non-GAAP measures: $ 8,905 $ 11,241 Adjusted basis net income Adjusted basis net income per diluted share Adjusted EBITDA Adjusted EBITDA margin $ 0.25 $ 0.31 $ 11,423 $ 13, % 15 % As of November 30, As of February 28, Description Cash and marketable securities $ 301,761 $ 156,003 Working capital 321, ,356 Deferred revenue 46,595 34,520 Convertible senior unsecured notes (carrying value) 272, ,299 Fiscal 2019 Fourth Quarter Business Outlook (In thousands except per share amounts) We are incorporating into our guidance factors including ongoing supply chain challenges, risks associated with the timing of Chinese New Year as well as a cautious macroeconomic outlook, particularly in our international markets where we have experienced some recent weakness. Range Description Low High GAAP nancial information: $ 86,000 $ 92,000 Revenues $ (0.02) $ 0.04 Net income (loss) per diluted share Non-GAAP nancial information: 3

4 $ 10,000 $ 14,000 Adjusted EBITDA $ 0.23 $ 0.29 Adjusted basis net income per diluted share E ective March 1, 2018, we adopted the new revenue recognition standard entitled Accounting Standards Update , Revenue from Contracts with Customers ("ASC 606"). The Fiscal 2019 Fourth Quarter Business Outlook re ects the e ects of adopting this new accounting standard. In the fourth quarter and scal year 2019, we do not expect ASC 606 to have a material impact on our revenue. The fourth quarter GAAP-basis net income outlook above includes the expected gain of approximately $2.5 million related to the legal settlement with a former LoJack supplier. This expected scal 2019 fourth quarter nonoperating gain is excluded from the Non-GAAP Adjusted EBITDA and Adjusted basis net income per diluted share guidance range above. Conference Call and Webcast We are hosting a conference call for analysts and investors to discuss our scal 2019 third quarter results and outlook for our fourth quarter at 1:30 p.m. Paci c Time on December 20, Participants can listen in via webcast by visiting the Investor Relations section of our website at Please go to the website at least 15 minutes early to register, download and install any necessary audio software. A replay of the webcast will be available for 30 days after the call. The conference call can also be accessed by dialing ( for international callers) and using the Conference ID# Following the call, an audio replay will also be available by calling or and entering the Conference ID# The audio replay will be available through January 3, About CalAmp CalAmp (Nasdaq: CAMP) is a technology solutions pioneer transforming the global connected economy. We help reinvent businesses and improve lives around the globe with technology solutions that streamline complex IoT deployments and bring intelligence to the edge. Our software applications, scalable cloud services, and intelligent devices collect and assess business-critical data from mobile assets, cargo, companies, cities and people. We call this The New How, powering autonomous IoT interaction, facilitating e cient decision making, optimizing resource utilization, and improving road safety. CalAmp is headquartered in Irvine, California and has been publicly traded since LoJack is a wholly owned subsidiary of CalAmp. For more information, visit calamp.com, or LinkedIn, Facebook, Twitter, YouTube or CalAmp Blog. 4

5 Forward-Looking Statements This press release contains forward-looking statements (including within the meaning of Section 21E of the U.S. Securities Exchange Act of 1934, as amended, and Section 27A of the U.S. Securities Act of 1933, as amended) concerning CalAmp. These statements include, but are not limited to, statements that address our expected future business and nancial performance and statements about (i) our plans, objectives and intentions with respect to future operations and products, (ii) our competitive position and opportunities, and (iii) other statements identi ed by words such as "may", "will", "expect", "intend", "plan", "potential", "believe", "seek", "could", "estimate", "judgment", "targeting", "should", "anticipate", "predict" "project", "aim", "goal", "outlook" and similar words, phrases or expressions. These forward-looking statements are based on management's current expectations and beliefs, as well as assumptions made by, and information currently available to management, current market trends and market conditions, and involve risks and uncertainties, many of which are outside our control, and which may cause actual results to di er materially from those contained in forward-looking statements. Accordingly, you should not place undue reliance on such statements. Particular uncertainties that could materially a ect future results include any risks associated with global economic conditions and concerns; competitive pressures; pricing declines; rates of growth in our target markets; prolonged disruptions of our or our contract manufacturers' manufacturing facilities or other signi cant operations; our dependence on outsourced service providers for certain key business services and their ability to execute to our requirements; our ability to maintain or improve gross margins; our ability to protect our intellectual property and the unpredictability of any associated litigation expenses; any expenses or reputational damage associated with resolving customer product, warranty and indemni cation claims; our ability to sell to new types of customers and to keep pace with technological advances; and other events and trends on a national, regional and global scale, including those of a political, economic, business, competitive, and regulatory nature. Other risks and uncertainties are detailed in our periodic public lings with the U.S. Securities and Exchange Commission ("SEC"), including but not limited to, our Annual Report on Form 10-K for the scal year ended February 28, 2018, led with the SEC on May 10, 2018 and our Quarterly Report on Form 10-Q for the quarter ended November 30, 2018 led with the SEC on December 20, You may obtain these lings at the SEC's website at We undertake no intent or obligation to publicly update or revise any of these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Non-GAAP Financial Measures "GAAP" refers to nancial information presented in accordance with U.S. Generally Accepted Accounting Principles. This announcement includes non-gaap nancial measures, as de ned in Regulation G promulgated by the SEC. We believe that our presentation of non-gaap nancial measures provides useful supplementary information to 5

6 investors. These non-gaap nancial measures are provided in addition to, and not as a substitute for measures of nancial performance prepared in accordance with GAAP. In this announcement, we report the non-gaap nancial measures of Adjusted Basis net income, Adjusted Basis net income per diluted share, Adjusted EBITDA (Earnings Before Interest Income, Interest Expense, Income Taxes, Depreciation, Amortization, stock-based compensation, non-cash costs and expenses arising from purchase accounting adjustments, litigation provisions, gain from legal settlement, restructuring charges and certain other adjustments as detailed in the accompanying non-gaap reconciliation), and Adjusted EBITDA margin. Adjusted Basis net income excludes the impact of intangible asset amortization expense, stock-based compensation, noncash interest from amortization of debt discount, non-cash costs and expenses arising from purchase accounting adjustments, litigation provisions, gain on legal settlement, restructuring charges and certain other adjustments as shown in the non-gaap reconciliation provided in the table at the end of this press release. We use these non- GAAP nancial measures to enhance the investor's overall understanding of the nancial performance and future prospects of our core business activities. Management does not believe that these items are re ective of our underlying performance. However, internally, these non-gaap measures are signi cant measures used by management for purposes of evaluating our core operating performance, establishing internal budgets, calculating return on investment for development programs and growth initiatives, comparing performance with internal forecasts and targeted business models, strategic planning, evaluating and valuing potential acquisition candidates and how their operations compare to our operations, and benchmarking our performance against our competitors. We believe this non-gaap nancial information provides additional insight into our ongoing performance and have therefore chosen to provide this information to investors for a more consistent basis of comparison and to help them evaluate our results of ongoing operations and enable more meaningful period-to-period comparisons. The reconciling adjustments in our non-gaap nancial results should not be interpreted as implying that these items are non-recurring, infrequent, or unusual. CALAMP CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except per share amounts) (Unaudited) Three Months Ended Nine Months Ended November 30, November 30, 6

7 Revenues $ 88,495 $ 93,669 $ 279,420 $ 271,517 Cost of revenues 52,114 55, , ,049 Gross pro t 36,381 38, , ,468 Operating expenses: 7,177 6,296 21,377 18,853 Research and development Selling and marketing General and administrative Restructuring Intangible asset amortization 12,746 12,981 37,766 38,167 11,719 10,993 37,146 38,159 1,247-5,196-2,893 3,710 8,534 11,278 35,782 33, , ,457 Operating income 599 4,207 4,274 6,011 Non-operating income (expense): 1, ,258 1,348 Investment income Interest expense Gain on legal settlement Loss on extinguishment of debt Other income (expense) (5,134) (2,573) (11,566) (7,658) 2,500 13,301 15,833 28, (2,033) - (218) 12 (721) 442 (1,454) 11,359 4,771 22,465 Income (loss) before income taxes and equity in net loss of a liate (855) 15,566 9,045 28,476 Income tax bene t (provision) 778 (3,351) (496) (5,970) Income (loss) before equity in net loss of a liate (77) 12,215 8,549 22,506 Equity in net loss of a liate (445) (409) (1,414) (1,122) Net income (loss) $ (522) $ 11,806 $ 7,135 $ 21,384 Earnings (loss) per share: $ (0.02) $ 0.33 $ 0.20 $

8 Basic $ (0.02) $ 0.33 $ 0.20 $ 0.59 Diluted Shares used in computing earnings (loss) per share: Basic 34,561 35,347 34,950 35,206 34,561 36,247 35,769 36,064 Diluted CALAMP CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands) (Unaudited) November 30, 2018 February 28, 2018 Assets Current assets: $ 271,613 $ 132,603 Cash and cash equivalents Short-term marketable securities Accounts receivable, net Inventories Prepaid expenses and other current assets 30,148 23,400 72,426 71,580 31,515 36,302 13,733 12, , ,885 Total current assets Property and equipment, net 23,192 21,262 Deferred income tax assets 21,859 31,581 8

9 Goodwill 73,284 72,980 Other intangible assets, net 43,518 52,456 Other assets 26,759 18,829 $ 608,047 $ 472,993 Liabilities and Stockholders' Equity Current liabilities: $ 31,556 $ 35,478 Accounts payable Accrued payroll and employee bene ts Deferred revenue Other current liabilities 8,314 10,606 20,030 17,757 37,979 31,688 97,879 95,529 Total current liabilities Convertible senior unsecured notes, net 272, ,299 Other non-current liabilities 36,195 24,249 Stockholders' equity: Common stock Additional paid-in capital Accumulated de cit Accumulated other comprehensive loss Total stockholders' equity 215, ,217 (13,485) (19,459) (645) (199) 201, ,916 $ 608,047 $ 472,993 - more - 9

10 CALAMP CORP. CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (Amounts in thousands) (Unaudited) Nine Months Ended November 30, CASH FLOWS FROM OPERATING ACTIVITIES: $ 7,135 $ 21,384 Net income Depreciation expense Intangible assets amortization expense Stock-based compensation expense Amortization of convertible debt issue costs and discount Loss on extinguishment of debt Impairment loss on cost method investment Tax bene ts on vested and exercised equity awards Deferred tax assets, net Unrealized foreign currency transaction losses (gains) 6,602 5,953 8,534 11,278 8,088 6,664 7,999 5,551 2, (716) 2, (404) 1,414 1,122 Equity in net loss of a Other liate (32) 59 5,722 3,923 Changes in operating assets and liabilities NET CASH PROVIDED BY OPERATING ACTIVITIES 48,093 58,731 CASH FLOWS FROM INVESTING ACTIVITIES: 36,461 11,273 Proceeds from maturities and sale of marketable securities Purchases of marketable securities Capital expenditures (43,103) (17,209) (8,884) (5,970) (1,519) (1,312) 10

11 Advances to equity method investee (103) (152) Other NET CASH USED IN INVESTING ACTIVITIES (17,148) (13,370) CASH FLOWS FROM FINANCING ACTIVITIES: 230,000 - Proceeds from issuance of 2025 Convertible Notes Payment of debt issuance costs of 2025 Convertible Notes Purchase of capped call on 2025 Convertible Notes Repurchase of 2020 Convertible Notes Proceeds from unwind of note hedges and warrants on 2020 Convertible Notes Taxes paid related to net share settlement of vested equity awards Proceeds from exercise of stock options (7,305) - (21,160) - (53,683) - 3,122 - (3,520) (2,452) (39,000) - Repurchases of common stock NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 108,578 (2,307) EFFECT OF EXCHANGE RATE CHANGE ON CASH (513) 1,335 Net change in cash and cash equivalents 139,010 44,389 Cash and cash equivalents at beginning of period 132,603 93,706 Cash and cash equivalents at end of period $ 271,613 $ 138,095 CALAMP CORP. RECONCILIATION OF NON-GAAP MEASURES TO GAAP (Unaudited) GAAP refers to nancial information presented in accordance with U.S. Generally Accepted Accounting Principles. This press release includes historical non-gaap nancial measures, as de ned in Regulation G promulgated by the SEC. We believe that our presentation of historical non-gaap nancial measures provides useful supplementary information to investors. The presentation of historical non-gaap nancial measures is not meant to be considered in isolation from or as a substitute for results prepared in accordance with GAAP. In this press release, we report the non-gaap nancial measures of Adjusted basis net income, Adjusted basis net income per diluted share, Adjusted EBITDA (Earnings Before Interest Income, Interest Expense, Income Taxes, 11

12 Depreciation, Amortization and stock-based compensation, loss on extinguishment of debt, gain on legal settlement, restructuring charges and other adjustments as identi ed below), and Adjusted EBITDA margin. We use these non-gaap nancial measures to enhance the investor's overall understanding of the nancial performance and future prospects of our core business activities. Speci cally, we believe that the use of these non-gaap measures facilitates the comparison of results of our core business operations between current and past periods. The reconciliation of GAAP basis net income (loss) to Adjusted basis (non-gaap) net income is as follows (in thousands except per share amounts): Three Months Ended Nine Months Ended November 30, November 30, GAAP basis net income (loss) $ (522) $ 11,806 $ 7,135 $ 21,384 Intangible assets amortization expense 2,893 3,710 8,534 11,278 Stock-based compensation expense 2,941 2,620 8,088 6,664 Non-cash interest expense from amortization of debt discount 3,157 1,661 7,224 4,924 GAAP basis income tax provision (bene t) (778) 3, ,970 Equity in net loss of a liate ,414 1,122 Loss on extinguishment of debt - - 2,033 - Realized gain on investment of equity securities Gain on legal settlement (2,500) (13,301) (15,833) (28,333) Litigation provision ,520 6,810 Legal expense for LoJack battery performance issue 1, ,733 1,579 Restructuring 1,247-5,196 - Impairment loss on equity investment Other Adjusted basis income before income taxes 9,105 11,391 30,967 31,912 Income tax provision (non-gaap basis) (a) (200) (150) (600) (700) 12

13 Adjusted basis net income $ 8,905 $ 11,241 $ 30,367 $ 31,212 Adjusted basis net income per diluted share $ 0.25 $ 0.31 $ 0.85 $ 0.87 Weighted average common shares outstanding on diluted basis 35,153 36,247 35,769 36,064 (a) The non-gaap income tax provision represents cash taxes paid or payable for the period after giving e ect to the utilization of net operating losses and tax credit carryforwards. The reconciliation of GAAP-basis net income (loss) to Adjusted EBITDA and the calculation of Adjusted EBITDA margin are as follows (dollars in thousands): Three Months Ended Nine Months Ended November 30, November 30, GAAP basis net income (loss) $ (522) $ 11,806 $ 7,135 $ 21,384 Investment income (1,398) (619) (3,258) (1,348) Interest expense 5,134 2,573 11,566 7,658 Income tax provision (bene t) (778) 3, ,970 Depreciation 2,261 1,970 6,602 5,953 Amortization of intangible assets 2,893 3,710 8,534 11,278 Stock-based compensation 2,941 2,620 8,088 6,664 Equity in net loss of a liate ,414 1,122 Loss on extinguishment of debt - - 2,033 - Legal expense for LoJack battery performance issue 1, ,733 1,579 Litigation provision ,520 6,810 13

14 Gain on legal settlement (2,500) (13,301) (15,833) (28,333) Restructuring 1,247-5,196 - Other (416) Adjusted EBITDA $ 11,423 $ 13,838 $ 37,289 $ 39,320 Revenue $ 88,495 $ 93,669 $ 279,420 $ 271,517 Adjusted EBITDA margin 13 % 15 % 13 % 14 % View original content to download multimedia: scal third-quarter- nancial-results html SOURCE CalAmp 14